THE PART-YEAR WITHHOLDING METHOD

Since tax withholding tables use taxpayers' weekly earnings to determine their yearly tax bracket, taxpayers that work full-time after an extended leave of absence may be over-taxed.

For example: A taxpayer that earns $500/week for 26 weeks is often taxed as if he were making $26,000 ($500 x 52 weeks) that year, and not on the $13,000 he will actually make. This will result in a large refund, which is an inefficient use of his income.

To make sure this does not happen, taxpayers in this situation should ask their employer to calculate their withholdings on what is know as the "Part Year" method. This formula bases withholding on actual earnings rather than the regular full year earnings assumption.